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Expiration - Residential Steel Storage Buildings

OTTAWA, December 4, 1997

4258-98

AD/1089

STATEMENT OF REASONS

IN THE MATTER concerning a review of an undertaking pursuant to subsection 53(1) of the Special Import Measures Act in respect of

RESIDENTIAL STEEL STORAGE BUILDINGS UNDER 200 SQUARE FEET IN AREA, ASSEMBLED OR UNASSEMBLED, ORIGINATING IN OR EXPORTED FROM THE UNITED STATES OF AMERICA AND MANUFACTURED BY OR ON BEHALF OF ARROW GROUP INDUSTRIES, INC., OF POMPTON PLAINS, NEW JERSEY, ITS SUCCESSORS AND ASSIGNS

DECISION

On this date, the Deputy Minister of National Revenue, having reviewed the undertaking from Arrow Group Industries, Inc., originally accepted on December 7, 1994, determined that the undertaking with respect to the above-mentioned goods no longer serves the purpose for which it was intended.

Therefore, the undertaking in question will expire on December 7, 1997, in accordance with subsection 53(2) of the Special Import Measures Act. This terminates all proceedings under the Act respecting the above-mentioned goods.

This document is also available in French.

Cet énoncé des motifs est également disponible en français.

STATEMENT OF REASONS

SUMMARY

On September 5, 1997, the Department of National Revenue, initiated a review of the undertaking accepted from Arrow Group Industries, Inc., with respect to certain residential steel storage buildings.

The Deputy Minister of National Revenue is satisfied that the undertaking no longer serves the purpose for which it was intended and that the present circumstances do not require the undertaking to be renewed. Accordingly, the undertaking will expire on December 7, 1997.

INTERESTED PARTIES

Complainant

The complainant, Spacemaker Limited (Spacemaker) is the sole Canadian producer of residential steel storage buildings under 200 square feet in area. Spacemaker is located in Mississauga, Ontario, and its full mailing address is listed in the attached Appendix.

Exporter

Arrow Group Industries, Inc., (Arrow) is located in Pompton Plains, New Jersey. The company's full mailing address is listed in the attached Appendix.

Importers

The names of importers of the subject goods are listed in the attached Appendix.

BACKGROUND

A dumping investigation was initiated on September 9, 1994, following a complaint filed by Spacemaker. The investigation concerned certain residential steel storage buildings produced by or on behalf of Arrow.

The investigation was suspended on December 7, 1994, when a price undertaking eliminating the margin of dumping was accepted by the Deputy Minister. At the time of acceptance of the undertaking, the weighted average margin of dumping was estimated to be 21.9 per cent.

According to the terms of the undertaking, Arrow agreed to increase the selling price of the subject goods to Canadian purchasers to eliminate the margin of dumping determined during the investigation.

Under the revised SIMA, which came into effect on January 1, 1995, undertakings must be reviewed every five years. However, the transitional rules require that undertakings accepted prior to the implementation of the new Act fall under the provisions of the old Act, i.e., they must continue to be reviewed within three years. This undertaking was accepted under the old Act.

Accordingly, on September 5, 1997, the Department of National Revenue initiated a review of the undertaking, as the undertaking agreement is due to expire on December 7, 1997.

PRODUCT

Product Definition

The goods subject to the undertaking are defined as follows:

residential steel storage buildings under 200 square feet in area, assembled or unassembled, originating in or exported from the United States of America and manufactured by or on behalf of Arrow Group Industries, Inc., of Pompton Plains, New Jersey, its successors and assigns.

Product Information

Residential steel storage buildings, commonly called storage or garden sheds are fabricated primarily from painted light gauge galvanized steel, with wall and roof panel material in thicknesses generally ranging from .0075" to .015". They vary in size, from approximately 8 square feet up to 200 square feet in area. The units are intended for use by the home consumer for outdoor storage purposes and are usually shipped in a knocked down condition for assembly by the consumer.

CLASSIFICATION OF IMPORTS

The Harmonized System (H.S.) provides two specific classification numbers under which the subject steel storage buildings may be imported into Canada:

9406.00.99.20

9406.00.99.90

CANADIAN INDUSTRY

Spacemaker is the sole Canadian manufacturer of residential steel storage buildings under 200 square feet in area.

CANADIAN MARKET

A review of import data from 1994 through to early 1997 indicates that in 1995 import volumes of subject goods fell from the previous year's levels. The downward trend in import volumes of the subject goods continued throughout 1996 and into early 1997.

The undertaking had an impact on the Canadian residential steel storage building market. Over the course of the undertaking period, several Canadian retailers who previously carried Arrow shed models, or both Arrow and Spacemaker sheds in their product lines, switched to offering only the Spacemaker models.

THE UNDERTAKING REVIEW

On initiation of this review, the complainant and the exporter were requested to provide relevant information with respect to the renewal or expiration of the undertaking. Importers were requested to contact the Department if they had comments concerning the undertaking.

In their response to the Department, both the complainant, Spacemaker, and the exporter, Arrow, requested that the undertaking be permitted to expire. In June 1997, Spacemaker was purchased by Arrow. In these circumstances, it was indicated that the undertaking had ceased to serve its original purpose. According to a June 1997 press release, the acquisition of Spacemaker provided Arrow with expanded distribution and manufacturing capacity. In the purchase transaction, Arrow also acquired Spacemaker's patented free-standing metal shelving products line.

No Canadian importers of the subject goods made representations to the Department.

CONSIDERATION AND ANALYSIS

When determining whether an undertaking should be renewed, the Deputy Minister must be satisfied that there is no longer a need for the undertaking and that there is no reason to terminate the agreement and make a preliminary determination.

In conducting its analysis, the Department gave consideration to the fact that, during the period of the undertaking there was never any need to terminate the undertaking and make a preliminary determination. Arrow adhered to the terms and conditions of the undertaking and supplied information to the Department on a monthly and quarterly basis with no violations of the undertaking. Furthermore, Arrow cooperated with the Department in supplying information for annual updates to the undertaking price grids.

The review also revealed that the present circumstances facing Spacemaker are quite different from the conditions that prevailed when the undertaking was accepted. Both Spacemaker and its parent company, Arrow, have requested that the undertaking be permitted to expire as the undertaking has ceased to serve its original purpose. As Arrow is now Spacemaker's parent company, Spacemaker no longer views Arrow as a serious threat in the market and has indicated that it no longer considers the undertaking as necessary.

CONCLUSION

On the basis of the above, the Deputy Minister is of the opinion that the undertaking accepted on December 7, 1994, no longer serves the purpose for which it was intended. Accordingly, pursuant to subsection 53(2) of SIMA, this undertaking will not be renewed and will expire on

December 7, 1997.

FUTURE ACTION

In accordance with subsection 53(3) of SIMA, the expiration of the undertaking terminates all proceedings under the Act in regard to certain residential steel storage buildings from Arrow Group Industries, Inc., of the United States.

PUBLICATION

Notice of the expiration of the undertaking is being published in the Canada Gazette pursuant to subsection 53(4) of the Special Import Measures Act.